Nadex review – Call spreads, Strategy, Demo and How To’s

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

Nadex Review

In this Nadex review we will see why this platform is the #1 for US traders.

What Is Nadex?

Nadex is a US regulated platform, where you can trade binary options. You can visit their website here.

It is owned by the U.K based IG Group, a FTSE 250 global financial services firm.

They have been in operations since before binary options became a buzzword. In business since 2009, they have helped the US market familiarize themselves with binary option trading.

Nadex’s headquarters are located in Chicago,IL in the United States. Their business philosophy centers on the twin values of transparency and simplicity.

Nadex Is An Exchange

In the binary options industry, we are used to dealing with brokers. Nadex is not a broker. Nadex is an exchange. There is a significant difference between a broker and an exchange.

An exchange gives you direct access to the market, by matching buyers and sellers directly. Brokers are the go-between that connect you to their partners who then give you access to the market.

An exchange offers many advantages over a traditional broker. The most important is transparency.

Brokers use a number of routes to let you pitch in the market. The reputable brokers only pursue the ethical routes. Many others use unethical tactics. For example, a broker may take an opposite position to you (trade against you) in order to get you access.

There is no way to know for sure when brokers use unethical practices. Which is why an exchange is a better choice.

Nadex only makes money by taking a $1 fee per contract you enter into and $1 for each contract you close, offering you direct access to the market.

  • Nadex makes no money when you lose.
  • They do not take broker commissions.
  • The company explicitly states the contract specifications for each asset they support on their website.
  • You do not have to open an account to access this information.

You will not find this level of transparency with most brokers.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

Nadex Regulation and Fund Protection

The binary options broker industry is awash with European-regulated brokers, many of whom have maintained excellent records for over a decade now.

However, it is refreshing to have a US-regulated broker on the premium list of reputable brokers. Nadex is one of the only US-based CFTC regulated exchanges. The US regulator is the Commodity Futures Trading Commission (CFTC).

The CFTC designates Nadex as a ” Derivatives Clearing Organization” and “Designated Contract Market”.

As a CFTC regulated exchange, Nadex holds all member funds in segregated accounts in top-tier US banks—BMO Harris Bank, Fifth Third Bank. This level of fund protection is not offered by most regular binary brokers.

Nadex Trading Platform

The Nadex trading platform is a proprietary platform. Everything about the platform centers on simplicity:

  • To access the platform, all you need is a username and password.
  • No download is needed (it is web-based).
  • The platform has no access fees either.
  • You get real-time indicative data.
  • The Nadex platform is easy to use and well arranged. Additionally, you can customize it. For example, you can make a watch list to track the assets you prefer.
  • It also offers robust charting and technical analysis tools.
  • Nadex also has mobile versions of its trading platform for convenient, on-the-go trading. It is called NadexGo. The apps are available for i0S (Apple iPhones and iPads) and Android operating system.

You can trade on Nadex on your Windows, Mac, or Linux PC, as long as you have a web browser and an internet connection.

An awesome feature is its cloud multi-device sync. For example, you can place an order using the Nadex trader on your PC. Then later on, for example in transit, you can use the Nadex mobile platform to manage or exit the trade.

Assets and Expiration Times

TRADEX supports several assets in multiple classes. Furthermore, TRADEX even offers new asset classes in addition to the traditional classes.

It offers assets in the usual Currency Pairs, Stock Indices, and Commodities classes. In addition, it offers assets in the Economic Events class and even allows you to trade Bitcoin.

When writing this Nadex review, we found out that the platform supports following assets:

Asset Class Number of Assets Example of Assets
Currency Pairs 10 EUR/USD, USD/CAD, EUR/JPY
Stock Indices 8 Dow, FTSE, DAX
Commodities 7 Gold, Crude Oil, Soybeans

The expiry time differs between assets. Assets like Currency Pairs may have an expiry time of as low as FIVE (5) minutes, while assets like Stock Indices may have an expiry time of as high as ONE (1) week.

Nadex Account Types

Nadex offers four standard types of trader accounts.

The account types include:

  • Individual Account for US Residents
  • Individual Account of Non-US Residents
  • Trust, Partnerships, LLC’S, Corporation Accounts for US-based entities
  • Permanent Demo Account

Opening an individual real trading account takes minutes.

Nadex offers everyone a free permanent demo account that you can open in less than one minute. Literally! You only need to input your name, country, phone number, and email address to create a demo account.

This is what you get with the Nadex Demo Account:

  1. You get to practice with a simulated $25,000 unlimited demo
  2. You can continue demo trading for as long as you like. It is your permanent practice account
  3. You do not have to open a live account nor make a deposit before you get access to demo trading
  4. Demo accounts have access to the same full-featured trading platform as live accounts

The Nadex demo account is a great way to try out this platform.

Deposit and Withdrawal

Nadex offers multiple deposit and withdrawal options. Its minimum deposit is $250.

Payment Method US traders Non-US traders
Deposit Withdrawal Deposit Withdrawal
Debit Card Yes Yes Yes Yes
Wire Transfer Yes Yes Yes Yes
ACH Bank Transfer Yes Yes No No
Paper check Yes No No No

Nadex Review: Fees

Nadex charges a contractual fee of $1 to open a contract and another $1 to close a contract. However some exceptions exist.

  • The standard contractual opening fee is $1.
  • They do not charge the contractual closing fee of $1 if you let your position expire out of the money.

Aside from contractual opening and closing fees of $1 each, the only other extra fees are the standard $25 fee for wire withdrawal and $25 fee for a returned check.

Therefore, deposits and withdrawals are free except for the wire withdrawal. The $25 fee for wire withdrawal is the standard fee in the financial industry.

Nadex Learning Center and Support

Nadex boasts of an expansive learning center. Thus, it is very clear that Nadex is committed to ensuring clients succeed in the market. This is because it sticks to their bottom line.

They make money when you open and close contracts. Accordingly, you wouldn’t keep opening contracts if you are largely unsuccessful. Therefore, it is in both in your interest and Nadex’s that you have long term trading success.

The Nadex learning center contains:

  • Extensive educational courses
  • Resources, such as Videos, Webinars, e-books, and even trade examples
  • News and Market Commentary
  • Glossary
  • FAQ

You can contact Nadex via Phone and Email. Response is terrific in terms of both speed and how it addresses the underlying situation which prompted you to initiate contact.

Is Nadex A Good Broker?

As you can see in our Nadex review, the platform is awesome. The biggest appeal of Nadex is that it is an exchange and not another run-of-the-mill broker. That makes all the difference in the world of binary options.

With Nadex you are certain that they are not trying to play a fast one on you. That certainty, complemented by simplicity and utmost transparency, makes Nadex a fantastic binary options company to choose for your trading activity.

Nadex continues to innovate in the binary options trading industry (for example they recently introduced Touch Brackets)

Its appeal is compounded by being regulated by the CFTC, offering services to US and non-US residents alike, record low fees, a robust trading platform, versatile asset classes giving you the ability to trade US and global indices, forex, commodities, economic events and Bitcoin; and a lifetime demo account.

10 Options Strategies To Know

Traders often jump into trading options with little understanding of options strategies. There are many strategies available that limit risk and maximize return. With a little effort, traders can learn how to take advantage of the flexibility and power options offer. With this in mind, we’ve put together this primer, which should shorten the learning curve and point you in the right direction.

4 Options Strategies To Know

1. Covered Call

With calls, one strategy is simply to buy a naked call option. You can also structure a basic covered call or buy-write. This is a very popular strategy because it generates income and reduces some risk of being long stock alone. The trade-off is that you must be willing to sell your shares at a set price: the short strike price. To execute the strategy, you purchase the underlying stock as you normally would, and simultaneously write (or sell) a call option on those same shares.

In this example we are using a call option on a stock, which represents 100 shares of stock per call option. For every 100 shares of stock you buy, you simultaneously sell 1 call option against it. It is referred to as a covered call because in the event that a stock rockets higher in price, your short call is covered by the long stock position. Investors might use this strategy when they have a short-term position in the stock and a neutral opinion on its direction. They might be looking to generate income (through the sale of the call premium), or protect against a potential decline in the underlying stock’s value.

In the P&L graph above, notice how as the stock price increases, the negative P&L from the call is offset by the long shares position. Because you receive premium from selling the call, as the stock moves through the strike price to the upside, the premium you received allows you to effectively sell your stock at a higher level than the strike price (strike + premium received). The covered call’s P&L graph looks a lot like a short naked put’s P&L graph.

Covered Call

2. Married Put

In a married put strategy, an investor purchases an asset (in this example, shares of stock), and simultaneously purchases put options for an equivalent number of shares. The holder of a put option has the right to sell stock at the strike price. Each contract is worth 100 shares. The reason an investor would use this strategy is simply to protect their downside risk when holding a stock. This strategy functions just like an insurance policy, and establishes a price floor should the stock’s price fall sharply.

An example of a married put would be if an investor buys 100 shares of stock and buys one put option simultaneously. This strategy is appealing because an investor is protected to the downside should a negative event occur. At the same time, the investor would participate in all of the upside if the stock gains in value. The only downside to this strategy occurs if the stock does not fall, in which case the investor loses the premium paid for the put option.

In the P&L graph above, the dashed line is the long stock position. With the long put and long stock positions combined, you can see that as the stock price falls the losses are limited. Yet, the stock participates in upside above the premium spent on the put. The married put’s P&L graph looks similar to a long call’s P&L graph.

What’s a Married Put?

3. Bull Call Spread

In a bull call spread strategy, an investor will simultaneously buy calls at a specific strike price and sell the same number of calls at a higher strike price. Both call options will have the same expiration and underlying asset. This type of vertical spread strategy is often used when an investor is bullish on the underlying and expects a moderate rise in the price of the asset. The investor limits his/her upside on the trade, but reduces the net premium spent compared to buying a naked call option outright.

In the P&L graph above, you can see that this is a bullish strategy, so the trader needs the stock to increase in price in order to make a profit on the trade. The trade-off when putting on a bull call spread is that your upside is limited, while your premium spent is reduced. If outright calls are expensive, one way to offset the higher premium is by selling higher strike calls against them. This is how a bull call spread is constructed.

How To Manage A Bull Call Spread

4. Bear Put Spread

The bear put spread strategy is another form of vertical spread. In this strategy, the investor will simultaneously purchase put options at a specific strike price and sell the same number of puts at a lower strike price. Both options would be for the same underlying asset and have the same expiration date. This strategy is used when the trader is bearish and expects the underlying asset’s price to decline. It offers both limited losses and limited gains.

In the P&L graph above, you can see that this is a bearish strategy, so you need the stock to fall in order to profit. The trade-off when employing a bear put spread is that your upside is limited, but your premium spent is reduced. If outright puts are expensive, one way to offset the high premium is by selling lower strike puts against them. This is how a bear put spread is constructed.

5. Protective Collar

A protective collar strategy is performed by purchasing an out-of-the-money put option and simultaneously writing an out-of-the-money call option for the same underlying asset and expiration. This strategy is often used by investors after a long position in a stock has experienced substantial gains. This options combination allows investors to have downside protection (long puts to lock in profits), while having the trade-off of potentially being obligated to sell shares at a higher price (selling higher = more profit than at current stock levels).

A simple example would be if an investor is long 100 shares of IBM at $50 and IBM has risen to $100 as of January 1 st . The investor could construct a protective collar by selling one IBM March 15 th 105 call and simultaneously buying one IBM March 95 put. The trader is protected below $95 until March 15 th , with the trade-off of potentially having the obligation to sell his/her shares at $105.

In the P&L graph above, you can see that the protective collar is a mix of a covered call and a long put. This is a neutral trade set-up, meaning that you are protected in the event of falling stock, but with the trade-off of having the potential obligation to sell your long stock at the short call strike. Again, though, the investor should be happy to do so, as they have already experienced gains in the underlying shares.

What is a Protective Collar?

6. Long Straddle

A long straddle options strategy is when an investor simultaneously purchases a call and put option on the same underlying asset, with the same strike price and expiration date. An investor will often use this strategy when he or she believes the price of the underlying asset will move significantly out of a range, but is unsure of which direction the move will take. This strategy allows the investor to have the opportunity for theoretically unlimited gains, while the maximum loss is limited only to the cost of both options contracts combined.

In the P&L graph above, notice how there are two breakeven points. This strategy becomes profitable when the stock makes a large move in one direction or the other. The investor doesn’t care which direction the stock moves, only that it is a greater move than the total premium the investor paid for the structure.

What’s a Long Straddle?

7. Long Strangle

In a long strangle options strategy, the investor purchases an out-of-the-money call option and an out-of-the-money put option simultaneously on the same underlying asset and expiration date. An investor who uses this strategy believes the underlying asset’s price will experience a very large movement, but is unsure of which direction the move will take.

This could, for example, be a wager on an earnings release for a company or an FDA event for a health care stock. Losses are limited to the costs (or premium spent) for both options. Strangles will almost always be less expensive than straddles because the options purchased are out of the money.

In the P&L graph above, notice how there are two breakeven points. This strategy becomes profitable when the stock makes a very large move in one direction or the other. Again, the investor doesn’t care which direction the stock moves, only that it is a greater move than the total premium the investor paid for the structure.

Strangle

8. Long Call Butterfly Spread

All of the strategies up to this point have required a combination of two different positions or contracts. In a long butterfly spread using call options, an investor will combine both a bull spread strategy and a bear spread strategy, and use three different strike prices. All options are for the same underlying asset and expiration date.

For example, a long butterfly spread can be constructed by purchasing one in-the-money call option at a lower strike price, while selling two at-the-money call options, and buying one out-of-the-money call option. A balanced butterfly spread will have the same wing widths. This example is called a “call fly” and results in a net debit. An investor would enter into a long butterfly call spread when they think the stock will not move much by expiration.

In the P&L graph above, notice how the maximum gain is made when the stock remains unchanged up until expiration (right at the ATM strike). The further away the stock moves from the ATM strikes, the greater the negative change in P&L. Maximum loss occurs when the stock settles at the lower strike or below, or if the stock settles at or above the higher strike call. This strategy has both limited upside and limited downside.

9. Iron Condor

An even more interesting strategy is the iron condor. In this strategy, the investor simultaneously holds a bull put spread and a bear call spread. The iron condor is constructed by selling one out-of-the-money put and buying one out-of-the-money put of a lower strike (bull put spread), and selling one out-of-the-money call and buying one out-of-the-money call of a higher strike (bear call spread). All options have the same expiration date and are on the same underlying asset. Typically, the put and call sides have the same spread width. This trading strategy earns a net premium on the structure and is designed to take advantage of a stock experiencing low volatility. Many traders like this trade for its perceived high probability of earning a small amount of premium.

In the P&L graph above, notice how the maximum gain is made when the stock remains in a relatively wide trading range, which would result in the investor earning the total net credit received when constructing the trade. The further away the stock moves through the short strikes (lower for the put, higher for the call), the greater the loss up to the maximum loss. Maximum loss is usually significantly higher than the maximum gain, which intuitively makes sense given that there is a higher probability of the structure finishing with a small gain.

10. Iron Butterfly

The final options strategy we will demonstrate is the iron butterfly. In this strategy, an investor will sell an at-the-money put and buy an out-of-the-money put, while also selling an at-the-money call and buying an out-of-the-money call. All options have the same expiration date and are on the same underlying asset. Although similar to a butterfly spread, this strategy differs because it uses both calls and puts, as opposed to one or the other.

This strategy essentially combines selling an at-the-money straddle and buying protective “wings.” You can also think of the construction as two spreads. It is common to have the same width for both spreads. The long out-of-the-money call protects against unlimited downside. The long out-of-the-money put protects against downside from the short put strike to zero. Profit and loss are both limited within a specific range, depending on the strike prices of the options used. Investors like this strategy for the income it generates and the higher probability of a small gain with a non-volatile stock.

In the P&L graph above, notice how the maximum gain is made when the stock remains at the at-the-money strikes of the call and put sold. The maximum gain is the total net premium received. Maximum loss occurs when the stock moves above the long call strike or below the long put strike. (For related reading, see “Best Online Stock Brokers for Options Trading 2020”)

One more step

Please complete the security check to access www.binaryoptionsedge.com

Why do I have to complete a CAPTCHA?

Completing the CAPTCHA proves you are a human and gives you temporary access to the web property.

What can I do to prevent this in the future?

If you are on a personal connection, like at home, you can run an anti-virus scan on your device to make sure it is not infected with malware.

If you are at an office or shared network, you can ask the network administrator to run a scan across the network looking for misconfigured or infected devices.

Another way to prevent getting this page in the future is to use Privacy Pass. You may need to download version 2.0 now from the Chrome Web Store.

Cloudflare Ray ID: 5806a5a8e875905d • Your IP : 91.105.238.94 • Performance & security by Cloudflare

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Top Binary Options Broker 2020!
    Perfect For Beginners and Middle-Leveled Traders!
    Free Education How To Trade!
    Free Demo Account!
    Big Sign-up Bonus!

  • Binomo
    Binomo

    Good Choice For Experienced Traders!

Like this post? Please share to your friends:
Binary Options Trading, Strategies and Robots
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: